Observations on economics, the academy, the wider world, and things that run on rails.

3.8.15

THIS IS WHAT COMPROMISE LOOKS LIKE.

Illinois public finances are more messed up than Wisconsin's, and a reform-minded Republican governor faces an intransigent Democrat majority in both chambers of the legislature. Thus, there's no reason for the most aggravated Democrats to hole up in another state to prevent votes for lack of a quorum as all they have to do is vote No. And legislative Speaker-for-Life Mike Madigan can get away with offering incoherent talking points on those rare occasions when he consents to be interviewed.

But long-time urban affairs commentator John McCarron proposes a partial compromise in Give this to Rauner and put people to work. Illinois contractors are subject to the Illinois Project Labor Agreement, which Mr McCarron characterizes as a "souped-up version of the more familiar federal Davis-Bacon Act." What Davis-Bacon, for federal projects, and the Project Labor Agreement, and Wisconsin's recently-repealed prevailing wage law (whose repeal revealed the extent of Republican rent-seekers among road builders, but I digress) all do is impose union scale wages on government projects. It's a statute that might have had racist origins (the old Washington Monthly of Charles Peters and James Fallows did yeoman service pointing it out), and its unintended consequences today include a disparate negative impact on minority businesses. And thus, Mr McCarron suggests, the rehabilitation of foreclosed housing is itself foreclosed, perpetuating slums.

As a matter of principle, I don't think the speaker would -- or should -- go for repealing the PLA on big public works such as expressways or schools. Somebody in the middle class ought to make a decent buck.But the purchase and rehab of foreclosed real estate?Freeing buyers of derelict bungalows from prevailing wage requirements -- and leveraging their investment with a small public subsidy -- could draw hundreds of small-time contractors and developers into the market. Even the fed's Davis-Bacon already exempts projects of eight dwellings or less. Why not Illinois?

Yes, there are errors of logic in the proposal, and generating a new set of rent-seekers is not without peril. But in a compromise, everybody walks away with something, and nobody walks away with everything. Currently, the governor and the legislature are on a track to get nothing.